Service charge is optional

17th May, 2008

Dear Economist,
I have been trying to discourage the practice of “service” being added to restaurant bills. Where it’s added I ask for its removal and don’t leave a tip, and where it isn’t I tip a fair amount plus the saved service charges from other restaurants. What else can I do?
Patrick Gillett

Dear Patrick,

Discard any question of whether the service charge is aimed at the staff or at the restaurant managers. It makes no difference. Because staff are not stupid, lower tips must mean higher wages, otherwise the waiters will find somewhere else to work.

Similarly, higher service charges will have to mean lower up-front prices, or commercial disaster will surely follow.

That noted, it seems to me that optional tips are an attractive way of doing business. By leaving the customers some discretion, the restaurant manager creates a way of charging less to stingy customers and more to fat-walleted ones. Huge marketing databases are interrogated to achieve the same effect; the tip system is easy by contrast. The American reputation for excellent service may also owe something to a culture of high and variable tipping.

In short, I have no idea why restaurants are abandoning this most excellent, business-friendly custom. If you wish to stamp out the practice, perhaps management consultancy would be an influential place to start?

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